More than 2,000 debt-ridden state-owned enterprises (SOEs) will be closed down or go bankrupt in the next four years, the State-owned Assets Supervision and Administration Commission (SASAC) said yesterday.

The loss of the 2,167 SOEs expected to go under will leave 3.66 million employees needing reallocation.

The enterprises, mostly large and medium-sized SOEs that have posted consecutive years of losses and have little hope of turning around and paying back their debts, will be the last to undergo policy-arranged SOE closure or bankruptcy in China, for which the government foots the bill. Following the expected closures, SOE bankruptcies are likely to be market-oriented.

In the decade up to the end of 2004 the government ordered the closure of 3,484 State-run projects and businesses.The closures involved about 237 billion yuan (US$28.6 billion) of loan loss provision to write off bad debts and affected 6.67 million employees.

Li Rongrong, minister of SASAC, said yesterday that the planned SOE reshuffle will make stability the top priority while protecting the legal interests of employees affected by closures.

The enterprises that are expected to be closed or go bankrupt according to the schedule should first have relevant reallocation funds settled, he said during a work conference of the commission held yesterday in the city of Chongqing.

He urged local governments and State assets watchdogs to work together closely to ensure stability during the transition.

According to SASAC statistics, the number of SOEs and State-controlled firms in China had declined from 238,000 in 1998 to 150,000 at the end of 2003. But such enterprises meantime witnessed their profits rise 22 fold during the period to a combined 495.1 billion yuan (US$59.8 billion) in 2003.

According to Li, this shows that State restructuring has been moving in the right direction.

Last year, 14 big SOEs from China were included in the world's top 500 businesses listed by Fortune magazine.

For small and medium-sized SOEs, changes have been even faster and more drastic, with more than 80 per cent of them undertaking reforms through mergers and acquisitions, rental, contracting and shareholding restructuring to improve efficiency, SASAC sources said.

To ensure standard practice during such reforms and to curb irregularities, Li Rongrong said the SASAC would join hands with relevant government departments to enhance supervision of the transfer of State-owned assets and equities, improve the performance evaluation systems for SOE managers and come up with more up-to-date regulations.

(China Daily May 12, 2005)